Will Property Allocation

Question 1

Opening Paragraph

Answer 1

When distributing the real property (devise) and personal property (bequest or legacy) under a testator’s will, an estate’s assets may be insufficient to satisfy the gifts made under the will. In this situation, a court must determine the order of distribution and abatement (reduction or elimination of gifts) by classifying each gift.

Question 2

Specific Gift

Answer 2

A specific legacy, devise, or bequest is a gift or property that can be distinguished with reasonable accuracy from other property that is part of the testator’s estate ( a specific car or item of furniture).

Question 3

General gift

Answer 3

A general legacy is a gift of personal property (such as money) that the testator intends to be satisfied from the general assets of his estate.

Question 4

Demonstrative Gift

Answer 4

A testator intends that a demonstrative legacy be paid from a particular source, but if that source is insufficient, he directs that the legacy be satisfied out of the general assets of the estate.

Question 5

Residuary

Answer 5

A residual legacy is a legacy of the estate remaining when all claims against the estate and all specific, general, and demonstrative legacies have been satisfied.

Question 6

Abatement

Answer 6

If the assets of the estate are insufficient to pay all debts of the testator and legacies, a court will “abate” or reduce the gifts to pay the debts. The court will abate the gifts in the following default order:

First: Intestate property

• Residuary Bequests
• General Bequests
• Specific Bequests (and demonstrative gifts) to non-relatives
• Specific Bequests (and demonstrative gifts) to relatives

Question 7

Ademption by Extinction

Answer 7

Traditionally, if the subject matter of a specific gift is missing, destroyed, or there is a substantial change in the form of the gift (the court can trace the gift it undergoes a minor change), the beneficiary takes nothing. This does not apply to general or demonstrative gifts, which can be satisfied from the general assets of the estate.

The beneficiary is entitled to whatever is left of the specifically devised property or balance of the purchase price owing from the purchaser of the property.

However, California courts will examine the testator’s intent at the time he disposed of the subject matter of the devise or bequest. If the there is evidence that the testator that the intended for the beneficiary to receive the gift, despite ademption, the court may treat the specific gift as a general or demonstrative gift, or trace the specific gift to its new form.

Question 8

Stock Dividends

Answer 8

At common law, a stock dividend is a property interest distinct from stock given by a specific bequest. A bequest of stock owned by a testator when the testator’s will is signed excludes subsequently acquired shares of the same stock. A bequest of a certain number of shares is deemed to include any additional shares of that security acquired by reason of a stock split, reinvestment, or merger initiated by the original security. However, the beneficiary is not entitled to any pre-death cash dividends or distributions. Many states held that a stock dividend is a property interest distinct from stock given by the specific bequest. Under the modern UPC approach, a stock dividend is treated like a stock split instead of a cash dividend.